Introduction

A bank is a financial institution that accepts deposits and channels those deposits into
lending activities. Banks primarily provide financial services to customers while enriching
investors. Government restrictions on financial activities by banks vary over time and
location. Banks are important players in financial markets and offer services such as
investment funds and loans.

Bank plays very important role in the economy of the country. I have selected “Silk
bank” for my Security and analysis project.

Silk Bank is a newly developed bank, Bank include trading and sales, retail banking,
commercial banking, and corporate finance

Their new identity Silk Bank is a name with a meaning that endorses our values. The
name takes its inspiration from ‘Silk’, a natural element known for its unique properties.
Their inspiration also comes from silk route which has been a corridor for trade and
commerce between Asia and rest of the world for centuries.

Their ascending symbol marks their quest to move higher and their tag line “Yes we
can” is a promise of unmatched service quality to their customer.

Their Vision is to establish Silk Bank as the benchmark of excellence in the banking
industry and be the bank choice of their target market. Silk bank stands for reliability,
their institutional sponsors Nomura, IFC and Bank of Muscat provide them with strong
financial backing and a frame work of good corporate governance, which will remain
their guiding principle to cultivate trust and transparency with their customer, regulators
and partners.

History
On September 15, 2001, under the supervision of the State Bank of Pakistan (SBP), the
institution then known as the Prudential Bank was acquired by the management and
associates of the Saudi Pak Industrial and Agricultural Investment Company (Pvt) Ltd
(SAPICO)
On March 31, 2008, a Consortium comprising of IFC, Bank Muscat, Nomura
International and Sinthos Capital and led by senior bankers Shaukat Tarin and Sadeq
Sayeed acquired an 86.55% stake in Silk bank for around $213 million or $0.47 per
share (PKR 29.3 equivalent per share). Under the new leadership, the bank will
continue to focus on SME & Consumer financing resulting in efforts of increased
profitability. The Bank has been successful in restoring the public confidence and

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strengthening its operations and it has helped it introduce a number of consumer
services and products nationwide. It launched a Car financing scheme last month. The
Bank also intends to launch a scheme to finance purchase of two-wheelers and plans to
introduce marriage and educational loans are also in the pipeline.

The Bank also plans to extend its branch network from existing twenty to twenty-eight
for which the State Bank of Pakistan has already given an approval. While eight of the
Bank's branches already facilitate on-line transactions, the Bank is in the process of
implementing centralized on-line banking facility and by June next year expects to have
full online operations with nationwide ATM facility at all its branches. The Bank will also
install its own ATMs next year in selected branches nationwide and envisages initiating
Islamic Banking Operations at one of its branches this year.

Saudi Pak Commercial Bank has come a long way to restore the confidence of the
depositors starting with the payment of profit to all eligible deposits for the entire period
of the moratorium which lasted for full nine months last year. The move earned the Bank
the confidence of the account holders as the new management decided to pay the profit
— totaling Rs 93 million — although it was not obligatory because the commercial
operations of the Bank remained suspended during the moratorium.

Location of the facilities of the business

The head office of the Silk Bank is located at I.I Chundrigarh Road in Karachi. Its other
branches are located almost all over the countries which are as follows:

Karcahi,Islamabad,Lahore,Faisalabad,Sialkot,Murree,Attock, Gujranwala,Peshawar,Qu
etta,Hyderabad,surgodha,sukkar,Rawalpindi,D.I.khan, Gawadar, Bolan Pass.

Product Mix
There are many product which are offered by the silk bank which are as follows

1. Insurance Products

2. Technology products

3. Current Account

4. Saving Account

5. Term deposits

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Insurance Product
Roshan Mustaqbil:

Silk bank Roshan Mustaqbil Bank insurance is an education plan exclusively designed
to cater there customer needs. The plan is underwritten by EFU Life Assurance Ltd.

Roshan Mustaqbil is a flexible, tailor-made, complete financial planning package that

facilitates to plan children’s future education requirements and guarantees a financially
secure tomorrow even in case of any mishap.

The plan offers a method of disciplined savings that helps accumulate a lump sum
amount that can be utilized to pay for the higher education needs of the nominated child.

Mehfooz Mustaqbil:

Silk bank Mehfooz Har Pal Bank insurance is a simple yet comprehensive accident and
hospitalization plan providing 24 hour worldwide coverage to the entire family. Mehfooz
Har Pal guarantees financial well being by paying out cash on death, disablement or
prolonged absence from work as a result of an accident or hospitalization due to an
accident. The plan is underwritten by EFU Life

Silk bank Sunehra Kal:

Life is full of new challenges and a wise individual who desires the best from life agrees
that financial planning is vital. would undoubtedly want to ensure that at every stage of
life could respond timely to the changing circumstances and achieve all their customer
goals – buying a car, a beautiful home and contentment of their customer family,
financial security, funds for children’s education and marriage and of course a
comfortable retirement.

Silkbank Sunehra Kal Bancassurance is a savings and investment plan exclusively

designed to cater all their customer needs. The plan is underwritten by EFU Life
Assurance Ltd.

Sunehra Kal is a comprehensive financial planning package that gives their customer
the dual benefit of protection along with potentially higher returns over a long-term on
your savings and investments. The most important benefit of Sunehra Kal is its flexibility
to suit your needs. Sunehra Kal is an ideal, regular premium unit-linked plan, to turn all
your dreams into reality.

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Technology Products

Silk Bank Visa Debit card:

Wherever, you go, your account goes with you. The Silk bank VISA Debit Card offers
international acceptance and enables to draw cash, direct from the account anywhere,
any time.

With the Silk bank Visa Debit Card, their customer can be a privileged customer at over
53,000 retailers in Pakistan and over 27 million outlets internationally.

Mobile Banking:

Silkbank-Direct Internet Banking is accessible through GPRS enabled mobile phones.

By registering for the Mobile Service you can avail the following facilities.

• Balance Inquiry
• Mini Statements
• Cheque Book Requests
• Account Statement Req

SMS Alerts:

Silkbank SMS Alerts offer customers the ability to stay informed around the clock,
anywhere, any time.

Once enrolled for SMS Alerts, they will receive alerts on transactions they selected, from
the following set of options:

Banking Transactions:

• All Transactions
• Transactions of Rs.50,000 & above
• Transactions of Rs.250,000 & above

Current Account:

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Online Express:

In Online Express the customer can enjoy a real time access to their current account
across the bank’s fast growing network of 65 online branches in 25 cities of Pakistan

With Silkbank Online Express there is a complete online banking solution, all under one
roof. And that’s not all. Online Express account opens the doors of the world with the
power of the Silkbank VISA Debit Card.

Saving Account:
Super Saver:

Super saver account entertains with many different activities so the customer can enjoy
high profit every month. Those activities are as follows:

• Highest returns
• VISA Debit Card
• Higher the deposit, higher the returns
• Profit calculated on Daily Product Basis
• Can be operated by Individuals or Companies
• Profit is payable monthly

PLS Saving:

Through Silkbank Savings PLS account, Silk bank customer can avail the benefits of a
Savings Account with the convenience of a Current Account. Some of the PlS saving
facilities are as follows:

• Profit paid out twice a year

• Monthly Profit of 5% on all Tiers
• VISA Debit Card
• Profit calculated on minimum balance every month
• Can be operated by Individuals or Companies
• Minimum balance requirement is Rs.50,000

Foreign Currency Account:

By investing in foreign currency account Silk Bank customer can earn remarkable profits
twice a year.

• Profit calculated on the minimum balance during the month

• Profit credited after every 6 months
• Can be operated by Individual or Companies
• Minimum balance requirement as low as USD/GBP/EUR2,500

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Term Deposit:

Munafa He Munafa:

Silkbank Munafa He Munafa Term Deposit Account gives the highest profit on a monthly
basis.

Account can be opened in a Munafa He Munafa Term Deposit Account with a minimum
balance of only Rs.100,000.

Salana Munafa:

Silkbank Salana Munafa Term Deposit Account gives the highest returns on the lowest
investment some more facilities can be availed on salana munafa scheme which are as
follows:

• Overdraft facility of up to 90%

• ATM/Debit Card with base account
• Online banking transitions, E-Statement and Internet Banking facilities
• Pay Order/Demand Draft facility with base account

7 Days Term Deposit:

For the Silk Bank valued account holders, Silk bank Special Notice Deposit Account is
also available for 7 and 30 days.

Board of Directors
Directors of Silk Bank:

Mr. Munnawar Hamid, OBE

Chairman
Mr. Ahmed Bin Mohamed Bin Abdullah Al Abri Director
Mr. Humayun Bashir
Director
Mr. Javed Hamid
Director
Mr. Sadeq Sayeed
Director
Mr. Yogo Ishida
Director
Mr. Arif Mahmood Ali
Director
Mr. Azmat Tarin
President & CEO

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 Mr. Khawaja Arshad Ghafur
Director Designate

Management Of Silk bank:

Mr. Azmat Tarin President & CEO
Mr. Aneeq Khawar Chief Operating Officer
Ms. Kishwer Aziz Director Investor Relation
Mr. Goharulayn Afzal Group Head Marketing & Strategic Planning
Mr. Jamil A. Khan Group Head Compliance, Commercial & FI
Mr. Talha Saeed Group Head Retail Banking
Ms. Shafaq Rahid Head of Customer Satisfaction & Quality
Ms. Sumbul Munir Head of Corporate& Investment Banking
Mr. Syed Jawaid Akhtar Head of Audit
Head of Legal / Compliance & Company
Mr. Syed Liaquat Ali
Secretary
Mr. Zahid Aftab Head of Consumer Risk

Operating Performance of the Company

During last five years the operating performance of Saudi Pak Bank which is now
named as Silk Bank are as follow:

In 2005 Saudi Pak Bank issued 50% right share at par to increase its capital base from
Rs 2.565 billion to Rs 3.847 billion. In 2009 Silk Bank had loss of (6,602,347)
accumulated and Surplus on revaluation of assets (net of tax) 1,423,691. Basic/Loss per
share (Rupee) (1.48) .In 2008 they had accumulated loss of (6,131,708). Surplus on
revaluation of assets are 1,079,670.

Major Competitors of the company

Silk Bank has got following competitor in commercial banking.

1. THE ROYAL BANK OF SCOTLAND LIMITED

2. JS BANK LIMITED
3. ALLIED BANK LIMITED
4. KASB BANK LIMITED
5. ARIF HABIB BANK LIMITED
6. MCB BANK LIMITED
7. ASKARI BANK LIMITED
8. MYBANK LIMITED
9. ATLAS BANK LIMITED
10. NIB BANK LIMITED
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11. BANK ALFALAH LIMITED
12. BANK AL HABIB LIMITED
13. SONERI BANK LIMITED
14. CRESCENT COMMERCIAL BANK LIMITED
15. STANDARD CHARTERED BANK (PAKISTAN) LIMITED
16. FAYSAL BANK LIMITED
17. UNITED BANK LIMITED
18. HABIB BANK LIMITED
19. HABIB METROPOLITAN BANK LIMITED

Markets the company serves

Saudi Pak Commercial Bank Limited which is now named as Silk bank (the Bank) is
engaged in banking services. The Bank operates through 65 branches in Pakistan. It
operates in four segments: corporate finance, trading and sales, retail banking and
commercial banking. Corporate finance includes investment banking activities, such as
mergers and acquisitions, underwriting, privatization, securitization, initial public offers
(IPOs) and secondary private placements. Trading and sales segment undertakes the
Bank’s treasury, money market and capital market activities. Retail banking provides
services to small borrowers, such as consumers, small and medium enterprises (SMEs)
and borrowers’ agriculture sector. It includes loans, deposits other transactions and
balances with retail customers. Commercial banking includes loans, deposits other
transactions and balances with corporate customers. The Bank conducts all its
operations in Pakistan.

Gross Domestic Product

In fiscal year 2008, Pakistan GDP was $454.2 billion as per purchasing power parity,
while Pakistani GDP as per official exchange rate was estimated to be $160.9 billion.
Extensive research work shows that real growth rate in 2008 GDP of Pakistan was

8|Page
about 4.7 percent. Pakistan GDP according to per capita income has been estimated to
be approximately $2,600.

Economical condition of Pakistan is underdeveloped as it suffers from internal crisis at

several levels like economy, political disputes, low foreign investments and others.
Every sector of Pakistan economy has made significant contributions to its GDP.
Agricultural sector has contributed 20.4 percent to Pakistan gross domestic product.
Industrial sector of Pakistan has accounted for 26.6 percent of 2008 GDP of Pakistan
while 53 percent of Pakistani comes from services sector.

In 2008 fiscal deficit surpassed Islamabad’s target of 4% of GDP. This was result of low
tax collection and increased spending. Inflation is a great problem in economy of
Pakistan. In 2007, inflation was 7.7%, which jumped up to20.8% during 2008. This was
so because of increase in prices of oil and various other commodities across world in
this period. As result of political and economic instability, value of Pakistani rupee has
depreciated.

However, government of Pakistan has talked of expanding Pakistan GDP to $38.15

billion in next five years. Pakistan gross domestic product was calculated to be
approximately $94.80 billion during 2003-04. This amount had gone up to $132.95
billion by financial year 2008-09. Any improvement in conditions would be only possible
if economy growth continues at a rate of seven per cent. Provided economic growth
remained pegged to at least seven per cent growth per annum, Pakistan gross domestic
product was expected to go up during financial year 2008-09.

However, at present, Pakistan economy is showing trends of growth as was forecast by

federal government and donor agencies. This will lead to growth in GDP of Pakistan,
greater employment opportunities, increase in per capita income and poverty removal.
Various measures were taken by federal government to maintain and speed up current
trend of economic growth in economic condition of Pakistan. Industry and service sector
will increase in recent years, as was confirmed by Dr Ashfaque Hasan Khan, finance
minister of Pakistan. Agricultural sector will not remain behind as well.

Pakistan GDP Growth Rate:

Pakistan Gross Domestic Product (GDP) expanded 2.00% over the last 4 quarters. The
Pakistan Gross Domestic Product is worth 168 billion dollars or 0.27% of the world
economy, according to the World Bank. Pakistan's economy has suffered in the past
from decades of internal political disputes, a fast growing population, mixed levels of
foreign investment, and a costly, ongoing confrontation with neighboring India. However,
IMF-approved government policies, bolstered by foreign investment and renewed
access to global markets, have generated solid macroeconomic recovery during the last
decade. Pakistan GDP Growth Rate chart, historical data, forecast and news.

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 Unemployment Rate

Employment rate is defined as the percentage of the working age population (ages 15
to 64 in most OECD countries) who are currently employed. According to the
International Labor Organization, a person is considered employed if they have worked
at least 1 hour in "gainful" employment.

Pakistan unemployment rate:

Pakistan unemployment rate stands at 5.20 percent of the labor force. The labor force is
defined as the number of people employed plus the number unemployed but seeking
work. The nonlabour force includes those who are not looking for work, those who are
institutionalized and those serving in the military. Pakistan's economy has suffered in the
past from decades of internal political disputes, a fast growing population, mixed levels
of foreign investment, and a costly, ongoing confrontation with neighboring India.
However, IMF-approved government policies, bolstered by foreign investment and
renewed access to global markets, have generated solid macroeconomic recovery
during the last decade. This page includes: Pakistan Unemployment Rate chart,
historical data, forecast and news.

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 Inflation Rate
In economics, the inflation rate is a measure of inflation, the rate of increase of a price
index (for example, a consumer price index).It is the percentage rate of change in price
level over time. The rate of decrease in the purchasing power of money is approximately
equal.

If P0 is the current average price level and P − 1 is the price level a year ago, the rate of
inflation during the year might be measured as follows:

Pakistan inflation rate:

Pakistan inflation rate stands at 10.52 percent year-over-year. Inflation rate refers to a
general rise in prices measured against a standard level of purchasing power. The most
well known measures of Inflation are the CPI which measures consumer prices, and the
GDP deflator, which measures inflation in the whole of the domestic economy.
Pakistan's economy has suffered in the past from decades of internal political disputes,
a fast growing population, mixed levels of foreign investment, and a costly, ongoing
confrontation with neighboring India. However, IMF-approved government policies,
bolstered by foreign investment and renewed access to global markets, have generated
solid macroeconomic recovery during the last decade. This page includes: Pakistan

11 | P a g e
Inflation Rate chart, historical data, forecast and news

Inflation is the rise in the prices of goods and services in an economy over a period of
time. When the general price level rises, each unit of the functional currency buys fewer
goods and services; consequently, inflation is a decline in the real value of money — a
loss of purchasing power in the internal medium of exchange, which is also the
monetary unit of account in an economy. Inflation is a key indicator of a country and
provides important insight on the state of the economy and the sound macroeconomic
policies that govern it. A stable inflation not only gives a nurturing environment for
economic growth, but also uplifts the poor and fixed income citizens who are the most
vulnerable in society.

Causes of inflation

Inflation is the rise in the prices of goods and services in an economy over a period of
time. When the general price level rises, each unit of the functional currency buys fewer
goods and services; consequently, inflation is a decline in the real value of money — a
loss of purchasing power in the internal medium of exchange, which is also the
monetary unit of account in an economy. Inflation is a key indicator of a country and
provides important insight on the state of the economy and the sound macroeconomic
policies that govern it. A stable inflation not only gives a nurturing environment for
economic growth, but also uplifts the poor and fixed income citizens who are the most
vulnerable in society.

It has been generally agreed by the economists that high rates of inflation and
hyperinflation are caused by an excessive growth in the supply of money. Today, most
economists favour a low steady rate of inflation. Low (as opposed to zero or negative)
inflation may reduce the severity of economic recessions by enabling the labor market to
adjust more quickly in a downturn, and reduce the risk that a liquidity trap prevents
monetary policy from stabilising the economy. The task of keeping the rate of inflation
low and stable is usually given to monetary authorities. Generally, these monetary

12 | P a g e
authorities are the central banks that control the size of the money supply through the
setting of interest rates, through open market operations, and through the setting of
banking reserve requirements.

There are many causes for inflation, depending on a number of factors. For example,
inflation can happen when governments print an excess of money to deal with a crisis.
When any extra money is created, it will increase some societal group’s buying power.
As a result, prices end up rising at an extremely high speed to keep up with the currency
surplus. All sectors in the economy try to buy more than the economy can produce.
Shortages are then created and merchants lose business. To compensate, some
merchants raise their prices. Others don’t offer discounts or sales. In the end, the price
level rises. This is called demand-pull inflation, in which prices are forced upwards
because of a high demand, and excessive monetary growth. For inflation to continue,
the money supply must grow faster than the real GDP.

Another common reason of inflation is a rise in production costs, which leads to an

increase in the price of the final product. For example, if raw materials increase in price,
this leads to the cost of production increasing, this in turn leads to the company
increasing prices to maintain their profits, this kind of inflation is call cost-push inflation.
Furthermore, rising labour costs can also lead to inflation, because workers demand
wage increases, and companies usually chose to pass on those costs to their
customers, this sort of inflation is called wage-push inflation.

Inflation can also be caused by international lending and national debts. As nations
borrow money, they have to deal with interests, which in the end cause prices to rise as
a way of keeping up with their debts. A deep drop of the exchange rate can also result in
inflation, as governments will have to deal with differences in the import/export level.

Finally, inflation can also be caused by federal taxes put on consumer products. As the
taxes rise, suppliers often pass on the burden to the consumer; the catch, however, is
that once prices have increased, they rarely go back, even if the taxes are later
reduced.

Effects and measurement of inflation:

The most immediate effects of inflation are the decreased purchasing power of the
rupee and its depreciation. Depreciation is especially hard on retired people with fixed
incomes, as spending power decreases each month. Those not on fixed incomes are
more able to cope, because they can simply increase their income. Another
destabilising effect of inflation is that some people choose to speculate heavily in an
attempt to take advantage of the higher price level. Because some of the purchases are
high-risk investments, spending is diverted from the normal channels and some
structural unemployment may take place. Finally, inflation alters the distribution of
income. Lenders are generally hurt more than borrowers during long inflationary
periods, which mean that loans made earlier are repaid later in inflated rupees. Inflation
weakens the function of money as storage of value, because each unit of money is

13 | P a g e
worth less with the passing of time. The progressive loss of the value of money during a
period of inflation makes the borrowers to be less willing to use the money as standard
differed payments.

To measure the price level, economists select a variety of goods and construct a price
index such as the consumer price index (CPI). This is one measure of inflation. The CPI
measures inflation as experienced by consumers in their day-to-day living expenses; it
is the ratio of the value of a basket of goods in the current year to the value of that same
basket of goods in an earlier year. By using the CPI, the inflation rate can be calculated.
This is done by dividing the CPI by the beginning price level and then multiplying the
result by 100. The GDP deflator is another very important measure of inflation as it
measures the price changes in goods that are produced domestically.

Pakistan publishes four different price indices, namely: the consumer price index (CPI),
the wholesale price index (WPI), the sensitive price index (SPI) and the GDP deflator.
The CPI is the main measure of price changes at the retail level. It indicates the cost of
purchasing a representative fixed basket of goods and services consumed by private
households. In Pakistan, the CPI covers the retail prices of 374 items in 35 major cities
and reflects roughly the changes in the cost of living of urban areas. The WPI is
designed for those items which are mostly consumable in daily life on the primary and
secondary level; these prices are collected from wholesale markets as well as from mills
at organised wholesale market level. It covers the wholesale price of 106 commodities
prevailing in 18 major cities of Pakistan. The SPI shows the weekly change of price of
53 selected items of daily use consumed by those households whose monthly income in
the base year 2000-01 ranged from Rs3000 to above Rs12000 per month. The SPI also
informs about the actual position of supply: whether the commodity is available in
market or not. If the commodity is not available, the reason for that is also recorded. It is
based on the prices prevailing in 17 major cities and is computed for the basket of
commodities being consumed by the households belonging to all income groups
combined as in CPI. In most countries, the main focus for assessing inflationary trends
is placed on the CPI, because it most closely represents the cost of living. In Pakistan,
the main focus is also placed on the CPI as a measure of inflation as it is more
representative with a wider coverage of 374 items in 71 markets of 35 cities around the
country. Inflation has started veering its ugly head in many parts of the world, including
Pakistan. Food inflation has emerged as the main contributor to inflationary pressures.
(See Table)

The inflation rates based on CPI, SPI and WPI for the year 2008-09 increased by 22.35
per cent, 26.33 per cent and 21.44 per cent respectively over the corresponding period
of 2007-08. It increased by 10.27 per cent, 14.09 per cent and 13.70 per cent
respectively in 2007-08 over the corresponding period of 2006-07. In 2006-07, the rate
of inflation increased by 7.89 per cent, 11.13 per cent and 6.92 per cent respectively
over the same period of 2005-06. An analysis of data for last three years for the same
period indicates that CPI, SPI & WPI were higher as compared to last two years. (See
Chart)

14 | P a g e
The government is cautious about inflation and thus has taken various steps to release
demand pressures on the one hand and enhance supplies of essential commodities on
the other. To ease demand pressures, the State Bank of Pakistan (SBP) has
continuously tightened the monetary policy over the last three years and more so in the
current fiscal year, while to enhance supplies, the government has relaxed its import
regime and allowed imports of several essential items so that there is a continuous flow
in the supply of those important commodities. In addition, the government increased the
imports of items like wheat, pulse and sugar to complement the efforts of the private
sector. In order to provide relief to the common man, the government also increased the
scale of operations of the Utility Stores Corporation (USC) which supplies essential
commodities such as wheat flour, sugar, pulses and cooking oil/ ghee at less than the
market prices.

Foreign Direct Investment

Foreign direct investment (FDI) refers to long term participation by country A into
country B. It usually involves participation in management, joint-venture, transfer of
technology and "know-how". There are two types of FDI: inward foreign direct
investment and outward foreign direct investment, resulting in a net FDI inflow (positive
or negative).

Foreign direct investment (FDI) plays an extraordinary and growing role in global
business. It can provide a firm with new markets and marketing channels, cheaper
production facilities, access to new technology, products, skills and financing. For a host
country or the foreign firm which receives the investment, it can provide a source of new
technologies, capital, processes, products, organizational technologies and
management skills, and as such can provide a strong impetus to economic
development.

56.9% decrease in FDI Including Privatization Proceeds as compared to July-December

08.

Sector Wise FDI Inflows ($ Million)

Sector 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Jul-Feb 10
Oil & Gas 80.7 268.2 186.8 202.4 193.8 312.7 545.1 634.8 775.0 398.7
Financial Business (34.9) 3.6 207.4 242.1 269.4 329.2 930.3 1,864.9 707.4 86.5
Textiles 4.6 18.5 26.1 35.4 39.3 47.0 59.4 30.1 36.9 15.6
Trade 13.2 34.2 39.1 35.6 52.1 118.0 172.1 175.9 166.6 48.9
Construction 12.5 12.8 17.6 32.0 42.7 89.5 157.1 89.0 93.4 72.1
Power 39.9 36.4 32.8 (14.2) 73.4 320.6 193.4 70.3 130.6 115.8
Chemical 20.3 10.6 86.1 15.3 51.0 62.9 46.1 79.3 74.3 77.2
Transport 45.2 21.4 87.4 8.8 10.6 18.4 30.2 74.2 93.2 76.4

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Communication
NA 12.8 24.3 221.9 517.6 1,937.7 1,898.7 1,626.8 879.1 111.3
(IT&Telecom)
Others 140.9 66.2 90.4 170.1 274.0 285.0 1,107.2 764.5 763.4 316.8
Total 322.4 484.7 798.0 949.4 1,523.9 3,521.0 5,139.6 5,409.8 3,719.9 1,319.3
Privatisation
- 127.4 176.0 198.8 363.0 1,540.3 266.4 133.2 0.0 0.0
Proceeds
FDI Excluding
322.4 357.3 622.0 750.6 1160.9 1980.7 4873.2 5,276.6 3,719.9 1,319.3
Pvt. Proceeds

June 14 (Bloomberg) -- Overseas direct investment in Pakistan fell 19.8 percent in the first
eleven months of the fiscal year ending June 30, according to the central bank.

Investment in the July-May period declined to $3.33 billion from $4.15 billion a year earlier,

Overseas investors sold $1.1 billion of Pakistani stocks in the 11-month period, compared with
purchases of $87.2 million a year earlier, according to the data.

Pakistan needs overseas investment to bolster an economy predicted to grow at the slowest pace
in eight years. The economy may expand two percent this fiscal year, from 5.8 percent last year.

Total foreign investment last year fell to $5.19 billion from $8.43 billion in the previous 12
months, missing the government’s target of $6.5 billion.

Foreign Investment inflows in Pakistan ($ Million)

Private
Greenfield Privatisation
Year Total FDI Portfolio
Investment Proceeds
Investment
2002-03 622 176 798 22
2003-04 750 199 949 -28
2004-05 1,161 363 1,524.00 153
2005-06 1,981 1,540 3,521.00 351
2006-07 4,873.20 266 5,139.60 1,820
2007-08 5,019.60 133.2 5,152.80 19.3
2008-09 3,719.90 - 3,179.90 -510.3
Jul-Feb-10 1,319.30 - 1,319.30 343.5
Total 19,803.00 2,805.20 22,068.60 2,160.50

Money Supply
In economics, money supply or money stock is the total amount of money available in
an economy at a particular point in time. There are several ways to define "money," but
standard measures usually include currency in circulation and demand deposits.

Money supply data are recorded and published, usually by the government or the
central bank of the country. Public and private-sector analysts have long monitored

16 | P a g e
changes in money supply because of its possible effects on the price level, inflation and
the business cycle.

Money Supply In Pakistan:

Even though money supply is measured as currency and deposits in the banking
system, new money is not created by increase in deposits; it is created only when a new
loan is made out by the banking system.

So there is contradiction number one. Money is measured as currency and deposits, but
new money can only be created through making out a new loan. This contradiction is
apparently resolved by arguing that since the freshly made loan immediately appears as
a deposit in the borrowers account, deposits rather loans are used as a measure of
money supply. In my view this is just a very clever way of masking the fact that entire
money supply of Pakistan is one giant loan at an usurious rate of interest–historically
ranging between 8-18%. The weighted average rate of interest on the outstanding
domestic bank debt currently stands at around 13%. The statistics reveal that money
supply growth exceeded its target levels for four consecutive years (2002-2005) due to
easy monetary policy stance to support the growth process. Pakistan and the IMF
projected to curtail Money Growth (M2) in the current fiscal year to 10.8 per cent from 15
per cent in 2007-08. The money supply growth is estimated to grow by 15 per cent in
next fiscal year 2009-2010.

Portfolio Management

Portfolio management is all about strengths, weaknesses, opportunities and threats

in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and
many other tradeoffs encountered in the attempt to maximize return at a given
appetite for risk.

239 loans, including private sector loans, amounting to $14.26 billion and 293 TA
projects amounting to $137.94 million have been extended to Pakistan By end of
this year, 11.5% of the portfolio (7 loans) was "at risk," which was an improvement
from 17.2% (10 loans) in last year.

Overall economic indicators of Pakistan

Economic Indicators (2009-2010)
(July-Feb)
Indicators 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
2009-10
Exports
9.13 11.16 12.31 14.39 16.47 17.01 19.22 17.79 1.53
(Billion $)

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Imports
10.34 12.22 15.59 20.6 28.58 30.54 39.96 34.82 2.50
(Billion $)
Trade Balance
1.2 1.06 3.28 6.21 12.11 -13.53 -20.74 -17.03 -0.964
(Billion $)
FDI
484.7 798 949.4 1524 3,521 5,125 5,152.80 3,719.90 1,319.30
(Billion $)
Foreign Investment
475 820 922 16677 3,872 8,417 5,193.00 2,665.0 1,024.10
(Million $)
Workers Remittances
2.39 4.24 3.872 4.17 4.6 5.49 6.5 7.81 5.79
(Billion $)
Forex Reserves
6.43 10.72 12.33 12.61 13.14 15.18 10.83 12.23 14.85
(Billion $)
Exchange Rate
61 57.7 57.92 59.66 60.16 60.5 71 - 84.40
(Rs. / US$

GDP Growth 3.60% 5.10% 6.40% 8.40% 6.60% 7.00% 5.80% 2.10% 2.00%

Inflation 3.40% 3.30% 3.90% 9.30% 8% 7.90% 10.30% 13.1% 13.0%

Source: State Bank of Pakistan (SBP)

Federal Bureau of Statistics (FBS)
Federal Board of Revenue (FBR)
www.brecorder.com
Conclusion
In today's world, all countries have interactions with each other. No country, irrespective
of ideological differences, stands isolated today. FDI is a strong and vibrant instrument
for an accelerated socio-economic development. We must help develop conducive
atmosphere in Pakistan and FDI is expected to follow. This challenge has to be met by
all stakeholders in Pakistan. Sincere and sustained efforts will produce productive
results.

Porter’s five factors model

The Porter's 5 Forces tool is a simple but powerful tool for understanding where power
lies in a business situation. This is useful, because it helps you understand both the
strength of your current competitive position, and the strength of a position you're
looking to move into.

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With a clear understanding of where power lies, you can take fair advantage of a
situation of strength improve a situation of weakness and avoid taking wrong steps. This
makes it an important part of your planning toolkit.

Conventionally, the tool is used to identify whether new products, services or

businesses have the potential to be profitable. However it can be very illuminating when
used to understand the balance of power in other situations too.

Application of Porters model on Banking Industry:

The Porter "Five Forces" analysis is only approximately applicable to the banking
industry. Certainly, banks do compete with
each other, but they also must cooperate with
one another in many respects. There is an
underlying problem in that the major banks of
the world are so similar that there is essentially
nothing one of them can do that the others
cannot easily duplicate. Because, contrary to
some beliefs, bankers are perfectly normal
human beings they do have individual abilities
and interests that may have a perceptible
influence on their institutions, but in the final
analysis, all are essentially the same.

Bargaining power of buyer is low where the products substitutes are not available and
customers are large in number. In case of banks there are lots of other banks and
banking intermediaries, having wide range of products, so power of buyer in banking
sector is high. The bank cannot force any customer to buy the desired product because
this directly affects its reputation, but can convince its customers by giving them special
discount or rewards. If we look at Silk bank we will find that the competitors are also
offering products due to which customer feel in power by saying that they can go to
some other bank in case of dissatisfaction.

Rivalry among existing firms:

There is tough competition among various banks. As variety of public and private banks
are already existing in the market, offering products on competitive prices. If we look at

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Islamic Banking products then, Meezan Bank, Habib Bank and many others are offering
wide range of products in this sector. The tough competition among these banks gives
rise to the challenges which the competitor banks have to face. The competition among
various banks increases the switching of the customers form one bank’s product to the
other bank.

The tables on the following pages show the total number of branches of some of the
banks working in Pakistan and the various products being offered by these Islamic
banking branches as compared to the Silk bank.

Banks No. of Branches

MCB 900

RBS 75

Meezan Bank Pakistan Ltd 120

Bank Al Falah 223

Habib Bank 1000

Bank Islami Pakistan Ltd 30

Emirates Global Islamic Bank 13

The bargaining power of customers:

Retail customers, ordinary individuals, have no bargaining power whatever as a

negotiator. A classic bit of banking wisdom is, "If you owe the bank $10,000, you have
a problem. If you owe the bank $10,000,000, the bank has a problem. The disparity in
size and power of the bank and the client is so great in most cases that the client has
essentially no bargaining power. Even in the case of large corporate clients, the
bargaining power of the client is limited. Any negotiation of terms and conditions of a
banking deal will take the form of a win/win negotiation where both sides are attempting
to develop a "deal" that is optimum for both participants. The client wants the money a
loan represents, and the bank wants interest on the loan. The price of credit and the
credit standing of the client are pretty much givens. The structure of the loan such as
the term and the repayment must be structured in such a way that the client can meet
the requirements in term of cash flows and the bank is assured of repayment. The price
of the credit may be negotiated a few basis points in one direction or the other, but both
parties know going into the negotiation approximately what the outcome will be.
20 | P a g e
Bargaining power of suppliers

A bank has three suppliers of its product, money:

1. Its depositors

2. The credit market

3. The central bank

Larger clients, corporations, government agencies, and wealthy individuals are offered
packages of services in what is actually a form of "market orientation" in current
management terminology. The bank is still the dominant party, even with very large
clients, but the client can make the threat of going to another bank, and if he/she/it is
large enough, the threat may have some significance. There is a distinct element of
competition for the business of large accounts, but even here it would be very difficult for
any entity to offer anything significant that its competitors could not duplicate almost
instantly. This part of the business becomes very much one of personalities and
individuals as opposed to "marketing initiatives."

The credit market as a source of supply of the raw material, money, is open to all at all
time if they are qualified participants. The source of supply can be argued to be infinite.

The Central bank is effectively the resource of last resort. Apparently, at least for the
moment, it will continue to supply liquidity to the banking system in virtually unlimited
quantities at very reasonable cost.

The threat of substitute products:

For the most part there is no real threat of substitute products in the banking industry. It
could be argued that a personal loan is a substitute for a mortgage, but in reality both
are loans and the loan is taken out because the customer wants money. The same can
be said of other bank products, and even institutions. A mortgage company is a
substitute for a bank, but it is the same product offered by an alternative vendor. There
is a good chance the mortgage company is owned by a bank holding company in any
case. The only question is the origination of the loan. Bank transfers are more common
in Europe than in United States banking practice. They serve approximately the same
function as checks and some of the new Internet banking services is actually transfers,
even in the states. There probably will be a continued evolution of products from paper
to electronic in coming years. This is an area of potential competition, and probably
innovation, but the final services, moving money from account A to account B will not
change.

The Threat of new entrants:

21 | P a g e
The banking sector of any country has always chances of growth and competition so
many new banks enter and leave the market. Mostly foreign banks step in the
developing countries for expanding their branches, not only this mergers between
foreign and local banks take place at large scale but Pakistan’s present economic
condition and government instability has arose the feelings of awe and terror among
most of the foreign banks to enter in the market. In future due to uncertainty and
security problems in Pakistan investors will not be willing to invest here. Due to overall
financial problems in the whole world new banks will not be entering in to the banking
industry.

Product
Product and services of banking industry:

Banking industry of Pakistan entertains their costumer with various sorts of products and
services among them the most important product and services are as follows:

• Consumer Banking Services

• Islamic Banking Services

• Corporate & Investment Banking

• Retail banking

• Investment banking

Demand and supply of Investment Banking:

An investment bank is a financial institution that assists corporations and governments

in raising capital by underwriting and acting as the agent in the issuance of securities.
An investment bank also assists companies involved in mergers and acquisitions,
divestitures, etc. Further to provide ancillary services such as market making and the
trading of derivatives, fixed income instruments, foreign exchange commodity and equity
securities.

22 | P a g e
Investment banks in the private sector in Pakistan started emerging in 1989 with the
listing of Crescent Investment Bank (CresBank). Since then over a dozen such banks
have been listed. Over the years, these banks were performing well mainly due to
various incentives available to them and the buoyant capital market as well as high
demand of funds as a lot of new industrial units was being established. However, over
the last two years the profitability of these banks has gone down substantially.

The fast expansion of the investment banks sector was due to higher profit margins and
the fact that these banks catered to the needs of the private sector — a niche that was
previously left to the whims of the inefficient state owned financial institutions.

Investment banks are subject to relaxed regulations i.e. lower reserve requirement,
being allowed to invest all their reserve funds in Federal Investment Bonds — earning a
relatively higher yield, lower tax rate applicable on them and comparatively lower initial
paid-up capital requirement.

The private investment banks, since their inception under revised government policy,
have been playing a major role in the development of the capital market in the country.
Being able to trade both on their own account as well as on their client's, lately, there
has been a shift in their activities which are now focused on specialized services such
as corporate finance, advisory services, underwriting and placement, etc., to match the
growing demand for funds and new equity issues, and in the emergence of new financial
products. These services have helped the investment banks in generating dependable
and reliable source of fee-based income.

According to financial experts, the investment banks do not suffer from liquidity crunch,
it is mismatch between resource mobilized and the type of funds required for their
operation. The shortage of long-term funds forces them to concentrate on short-term
lending and getting actively involved in trading of already listed equities.

The investment banks, in principle, differ from development financial institutions (DFIs)
which often enjoy soft-term credit lines from multilateral donor agencies. Activities
performed by investment banks include syndication of loans or bonds, issuing
guarantees, fund management, long-term financing and corporate finance. Corporate
finance includes placement of equities and debt instruments both domestic as well as
offshore, underwriting - equity and debt instruments. Whereas, the commercial banks
activities are concentrated on providing short-term finances mainly for working capital.

During the1990-94 period, the investment banks were able to generate a lot of fee
based income mainly from underwriting of public issues. Most of the scrips were over-
subscribed and the underwriting commission was straight income. Similarly, because
the prices of shares were constantly moving up, they also made good capital gains on
their investment portfolios.

The year 1991 saw major changes in government policies including opening of the
market to foreign investors, privatization of public sector companies, deregulation of

23 | P a g e
economy and allowing commercial banks in the private sector. Foreign exchange
restrictions were liberalized and Pakistanis were permitted to maintain foreign currency
accounts. All these policy measures were responsible for the accelerated economic
activities specially in the capital market. During the1991-95 period, more than 200 new
companies were listed with a total paid-up capital of over Rs, 85,685 million. With 1994
being the year of highest number of listings, the total paid-up capital amounted to over
Rs.34,661 million.

Demand and Supply of Islamic Banking:

Islamic banking which used to be a myth in this part of the world several years ago is
not only in vogue but is gaining rapid popularity these days. Not only a number of
foreign and local banks are doing good business in Islamic banking but even the
conventional banks have been tempted to open special Islamic banking counters. In fact
it was Dubai Islamic Bank which took the lead as early as 1975. Thereafter, Islamic
banking grew into a worldwide industry exceeding handling amounts exceeding $900
billion. In Pakistan, Meezan Bank has made rapid strides in this sector followed by Bank
Islami.

Almost all the banks engaged in Islamic banking are working under the umbrella of
“shariah board” or “shariah committee” consisting of a panel of renowned religious
scholars who are the guiding stars. A few of these banks have a single ‘shariah
consultant’ or ‘shariah advisor.’ Most of these shariah scholars or advisors are engaged
against hefty remunerations for their expert-advice and guidance on Islamic finance.
According to a rough estimate, the numbers of the most outstanding experts are about
12, which is very meager as compared to their demand in the market. It is due to paucity
of their numbers that they are serving on different ‘shariah boards’ and ‘shariah
committees.’ Some of them are even advising their competitors. This system is working
in Pakistan. In Malaysia, one such scholar cannot serve on more than one board or
committee at a time. It would be in the fitness of things if this restriction is imposed in
Pakistan also.

The demand of Islamic banking can be realized by analyzing that there are many
product have been introduced in this sector such as

• Islamic Corporate Banking

• Islamic Investment Banking
• Islamic Trade Finance
• Islamic General Banking
• Islamic Consumer Banking

The growing popularity of Islamic banking, mainly with Muslims and especially in Muslim
countries has driven conventional banks like Citibank, HSBC, RBS, Standard Chartered,

24 | P a g e
etc. to turn to open an Islamic banking unit. However, Islamic banks need to be careful
in crossing their limits to attract affluent non-Muslim clients just for the sake of earning
more and more profits. Lust for wealth should not blur their path. For them piety and not
profit should be the key objective.

Demand and Supply of Consumer Banking:

Over the last 5 years, Pakistan witnessed a phenomenal growth of consumer banking.
This unprecedented development has followed privatization of nationalized banks,
banking reforms brought about by the State Bank of Pakistan and an increasingly
marketing-oriented approach primarily aimed by banks at a large urban consumer base.

Be they large or small bank, multinational or local, each one of them is geared towards
making its mark in an already competitive environment that is the outcome of consumer
banking. Multinational banks such as ABN AMRO, Citibank and Standard Chartered
have the support of the knowledge base and funds of their foreign principals which
made them first to introduce products, services and innovative technologies to their
consumer base.

Hot on the heels were the newly privatized banks, UBL, HBL and MCB which have
embarked in consumer financing activities in not just big cities but smaller ones too, by
virtue of their huge branch network. In doing so, they have generated huge volumes of
business while at the same time driving down the prices of the products they offer. For
instance, in 2002, HBL’s consumer banking portfolio was worth less than a billion
rupees. By the end of 2004, it is worth Rs. 17 billion. Similarly, since 2003 when it was
privatized, UBL has launched 12 to 14 new products and according to its Deputy Chief
Executive M.A.Mannan, each one of them has been a market leader on month-to-month
acquisition volume. And where the local banks such as Soneri, Askari and Union lack in
technology, they make up by offering similar services at a much lower costs in our urban
centers.

Banks’ consumer finance portfolio has grown at a rapid pace over the last four years or
so, and its share in overall credit of the banking system had risen to 13.8 percent by end
fY07 from virtually negligible levels, before declining to 12.0 percent by the end of June
fY08.

While all categories of consumer finance have grown substantially since the inception of
this product, the most significant increase has been observed in personal loans, which
are generally obtained for meeting different types of consumption needs. The growing
demand for, and interest in, consumer finance however, is not unique to Pakistan, and
many of the emerging economies have seen a similar shift in their respective credit
portfolios.

25 | P a g e
While the foreign banks have played the pipers’ role when it comes to introducing new
products, they have targeted the same segment which may be one of their limitations in
this area. On the other hand, industry experts predict that the real growth will come from
local giants such as the UBL, HBL and MCB which have the necessary experience and
knowledge of customizing products to specific local preferences.

Pricing of the Banking Product:

All organizations must settle a price for the services they offer. The price for
services is an important element of the marketing mix, being an important
income source for the organization. The settlement of a correct price, both
for the market and the competition, is a significant element for the sector of
financial – banking services. Another important factor to take into
consideration is the fact that the banks do not settle only the prices for
individual services, but also coordinate their prices for service packages. As
the competition in the financial – banking services has intensified, the
settlement of correct prices has become an essential element for the
marketing strategy. Nevertheless it is important to remind that the price is
not a central element. There are other significant grounds, the price being
only one of the elements of the marketing mix.

The price of the banking services:

For a bank the price is one of the elements of the marketing mix. The prices must
always be in conformity with the other four Ps and they must not be considered as a
purely financial problem, in which they are calculated by estimating the costs, to which a
margin for profit will be added. The marketing evaluates the market, essentially, from the
client’s point of view. Thus, the perception of the price by the client is more critic than
the size of the development costs or of the profit that will be realized. Nowadays, the
clients take into consideration the value perceived by them for services, the producers
recover the costs afferent to the production and commercialization of the merchandise.
The recovery of the costs creates the premises of the economic activity resumption.

The evaluation of the cost of a service involves two problems

The identification of the costs relevant for the company when the profit for a
certain service is calculated;

The identification of some methods for the allocation of the relevant costs on this
service.

Price strategies:

26 | P a g e
As it has been mentioned before, the price is a very important part of the marketing mix. If a
product is not given a correct price, this may affect the sales and may lead to the product’s
failure. The price and sales of the product Is therefore related one to another. There are 6 main
strategies to settle the price for a product. These are:

1. Cost plus profit – this is the most sensitive strategy to costs; the institution
calculates how much the manufacturing of the product cost it, adds a margin for the
profit and requires the clients this price;

2. The settlement of the prices for “taking the cream” –this strategy may be used for
products that are very new and of high quality; it means the settlement of the price when
the product is freshly introduced on the market to “take the cream” of the demand for
that product, maximizing the profit to cover the research and development expenses,
after which, later, in time, the price may be reduced to increase the demand;

3. The settlement of the price depending on the competition - This strategy takes
into consideration the price the competition practices, thus the price will be similar to the
one of the competition, but will allow the covering of the expenses and the profit margin;

4. The settlement of the price on the market – the price of a product is settled
depending on the price of a similar product already existing on the market. The
difference in comparison to the settlement of the price depending on the competition is
that the settlement of the price on the market might not cover the production expenses
of the product;

5. The settlement of the price depending on the value – this strategy is based on the
evaluation of the clients’ perception vis-a-vis the value of the product answering the
question “How much a client would pay for this product?”, this strategy is then the most
oriented towards marketing.

6. The settlement of the price to penetrate – the bank will settle a low price for a
product with the purpose to win fast a big quota of the market and thus to realize a fast
and substantial penetration.

Factors that influence the price calculation:

There are many factors that influence to a smaller or bigger extent the price formation
and that a company must take into account. As it was earlier presented, the financial
product has distinct features, with a complex structure, being often represented by a
packet of services, which implies difficulties in the determination of the price. For
example, the rate paid by the consumer for the leasing of a car has several compounds:
the value of the car, the corresponding interest, the value of the car insurance.

The structure of the costs:

27 | P a g e
The bank will wish to establish a price which will cover all the costs for developing and
promoting of the service, obtaining a corresponding profit of the risk it takes, in a last
instance, the price must reflect the following elements:

The fix and variable costs of the provided service.

The risk that must be covered.

The future development (investments).

The corresponding profit of the invested fund.

The Risk:

The risk is an element of the financial institution costs which it has to take into
consideration in determining the price. The risk appears in the moment the price of a
service (for example a loan) must be acquitted no matter the performance of the
financial institution, in case of the deposit of an amount of money, the depositor is sure
that he may withdraw in any moment the full amount.

The Shareholders:
For the subscribed capital the shareholders receive compensation in the form of
dividends or by the increase of the held shared a compensation that must be found in
the final price.

The Consumers:

The consumers, their perceptions about the products and services and the level of the
requests are found in the final price of the service. The consumers of the financial
services perceive harder the value and the quality of what they bought, because of the
lack of information, of some aspects less visible of the services and of the
consequences in the future which some of them have. their request is less elastic than
the one of the material goods, for which the relation quality- price and costs is easier to
determine. There are categories of services, for example the insurance, that are
sensible to the price variations, probably because of the legal obligations of paying
some insurance (for example the car insurance, that is paid annually).

The Competition:

28 | P a g e
The prices of the competition may influence the price strategies of any bank. The clients
will evaluate the price by comparing the products of many organizations. Any company
must know the price and quality of the competition products and use the information in
establishing their own prices when there are offered similar services, of close quality
and value, the price must be comparable to the one practiced by the closest
competition, otherwise the organization risks the loss of sales.

Internal factors External Factors

The Objective The

of the shareholders
company
The
components Consumers
of marketing
mix

The Price

The
Cost The factors Competition
that influence
the
calculation Legal
Risk Of the restrictions
banking
services price

Conclusion
The approach of marketing regarding the price policy must start from the solvable
request (how much is the client going to pay for the benefits he receives) and not from
29 | P a g e
the traditional way of calculating the costs of production and adding of a “reasonable”
margin for the sale costs and profit.

The problem of the cost must be taken into account, by the simple motive that the prices
too similar to the production, administration and commercialization price of the
company’s service will lead to bankruptcy, and prices too high according to the costs will
facilitate the taking over of the business by the competition.

There were described three representative situations of the price, of the many which the
multi-products financial service production providing organizations confront with and
there were brought arguments that the factors that must be analyzed are similar,
although the means of founding out of the optimal solution may be different.

Because the material of the banking products prices is extremely elaborated we did not
concentrate over the banking service prices, on the commissions and the expenses not
only over the interests or exchange rates that, generally, represent the object of study of
the macroeconomic conjunctures or of the market.

Life Cycle of the Product

Product is defined as "anything that is capable of satisfying customer needs”. This
definition includes both physical products (e.g. cars, washing machines, DVD players)
as well as services (e.g. insurance, banking, private health care).

Businesses should manage their products carefully over time to ensure that they deliver
products that continue to meet customer wants. The process of managing groups of
brands and product lines is called portfolio planning.

The stages through which individual products develop over time is called commonly
known as the "Product Life Cycle".

The classic product life cycle has four stages (illustrated in the diagram below):
introduction; growth; maturity and decline.

Introduction Stage:
At the Introduction (or development) Stage market size and growth is slight. It is
possible that substantial research and development costs have been incurred in getting
the product to this stage. In addition, marketing costs may be high in order to test the
market, undergo launch promotion and set up distribution channels. It is highly unlikely
that companies will make profits on products at the Introduction Stage. Products at this
stage have to be carefully monitored to ensure that they start to grow. Otherwise, the
best option may be to withdraw or end the product.

30 | P a g e
Growth Stage:
The Growth Stage is characterized by rapid growth in sales and profits. Profits arise due
to an increase in output (economies of scale) and possibly better prices. At this stage, it
is cheaper for businesses to invest in increasing their market share as well as enjoying
the overall growth of the market. Accordingly, significant promotional resources are
traditionally invested in products that are firmly in the Growth Stage.

Maturity Stage:
The Maturity Stage is, perhaps, the most common stage for all markets. it is in this stage
that competition is most intense as companies fight to maintain their market share.
Here, both marketing and finance become key activities. Marketing spend has to be
monitored carefully, since any significant moves are likely to be copied by competitors.
The Maturity Stage is the time when most profit is earned by the market as a whole. Any
expenditure on research and development is likely to be restricted to product
modification and improvement and perhaps to improve production efficiency and quality.

Decline Stage:
In the Decline Stage, the market is shrinking, reducing the overall amount of profit that
can be shared amongst the remaining competitors. At this stage, great care has to be
taken to manage the product carefully. It may be possible to take out some production
cost, to transfer production to a cheaper facility, sell the product into other, cheaper
markets. Care should be taken to control the amount of stocks of the product.
Ultimately, depending on whether the product remains profitable, a company may
decide to end the product.

Banking Product Life Cycle

Banks are like any other business in that they produce goods and services to
customers. Like any other businesses, their products have life cycles. A couple that
come to mind in various stage of their life cycle include:
Checks or Demand Deposit Accounts (DDAs). Checks are in a decline phase of their life
cycle. The use of checks is declining rapidly and being replaced by electronic bill pay
and debit cards.
Internet Banking and Electronic Bill pay are in their growth phase as more and more
customers are using these services and using checks less and less.

31 | P a g e
Debt cards or Check Cards are in their maturity phase as they are accepted by nearly
everyone.
Those are just three ideas but they are each related to one another.

Availability of technology

1). Technology has opened up new markets, new products, new services and efficient
delivery channels for the banking industry. Online electronics banking, mobile banking
and internet banking are just a few examples.

2). Information Technology has also provided banking industry with the wherewithal to
deal with the challenges the new economy poses. Information technology has been the
cornerstone of recent financial sector reforms aimed at increasing the speed and
reliability of financial operations and of initiatives to strengthen the banking sector

3). The IT revolution has set the stage for unprecedented increase in financial activity
across the globe. The progress of technology and the development of worldwide
networks have significantly reduced the cost of global funds transfer.

4). It is information technology which enables banks in meeting such high expectations
of the customers who are more demanding and are also more techno-savvy compared
to their counterparts of the yester years. They demand instant, anytime and anywhere
banking facilities.

5). IT has been providing solutions to banks to take care of their accounting and back
office requirements. This has, however, now given way to large scale usage in services
aimed at the customer of the banks. IT also facilitates the introduction of new delivery
channels--in the form of Automated Teller Machines, Net Banking, Mobile Banking and
the like. Further, IT deployment has assumed such high levels that it is no longer
possible for banks to manage their IT implementations on a standalone basis with IT
revolution, banks are increasingly interconnecting their computer systems not only
across branches in a city but also to other geographic locations with high-speed network
infrastructure, and setting up local area and wide area networks and connecting them to
the Internet. As a result, information systems and networks are now exposed to a
growing number.

Globalization in banking is based on four important pillars viz. 1) trade in goods and
services; 2) flow of capital and movement of human beings across boundaries; 3)
harmonization of regulatory framework in different countries; and 4) developments in
technology, particularly those in information technology.
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1) Majority of the Customers perceive that Technology in Banking Industry has a
positive impact on the way the services are rendered to the customers. 57% of the
Customers Strongly Agree that it is necessary for banks to implement IT in their
operations. 60% of the Respondents Strongly Agree that Technology improves
customer services in banks.

2) Nearly 87% of the Private Sector Banks have Respondent that Technology
Implementation has resulted in Achieving Economies of Scale of Bank. 57% of the
Public Sector Banks have agreed that the Technology has resulted in Achieving
Economies of Scale of Bank. On other hand, 90% of the Foreign Banks have said that
by Implementing Technology in the Bank, they are able to achieve Data Communication
in Achieving Economies of Scale of Bank.

3) Nearly 89% of the Private Sector Banks have Respondent that Technology
Implementation has resulted in Efficient Low Cost Data Communication. 78% of the
Public Sector Banks have agreed that the Technology has resulted in Efficient Low Cost
Data Communication. On other hand, 93% of the Foreign Banks have said that by
Implementing Technology in the Bank, they are able to achieve Data Communication in
Low Cost and Efficient way.

4) In case of Private Sector Bank, there is a strong association between the drive to
implement Technology in the Banks and Impact on Profitability, Competitive Pressure,
and Customer Needs.

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